Neal Boortz supports fair tax proposal?

Neal Boortz web site ^ | Friday, December 10, 2004 | Neal Boortz

[JOHN W K]

ANSWERING A FAIR TAX QUESTION

During yesterday's show a caller asked what would happen to her 401K funds if the Fair Tax bill became law. No income taxes had ever been paid on that money residing in her 401K. If, by the time she starts drawing that money out, the income tax is history, will she have to pay some sort of penalty? One month ago I would have rattled off the answer. No. No penalty. No taxes. You take the money and run. Yesterday, however, I was a bit more cautious. I've spent many hours over the past weeks studying the history of the income tax, the history of withholding, and various schemes for tax reform including, of course, the Fair Tax. I wanted my answer to be dead-on accurate, so I deferred until I could dive into the bill.

[ancient_geezer]

There is plenty of precedent for doing so and who is to say the Feds won't follow suit?

If they simply exempt particular items once the legislation in place, that becomes a tax cut for everyone.

Otherwise they face the entire po'd electorate in raising the rate. Think about it.

Given Washington's propensity for double speak, by definition anything named FAIR has to be anything but.

The bill wasn't written by anyone in Washington. It happens to be the product of AFT, founded and funded by a group of Houston businessmen for the specific purpose of researching, authoring and promoting it.

[NonValueAdded]

You call that VOLUNTARY? Where everyone gets assessed a fixed amount? You have to be joking.

No, I never said anything about voluntary ... the tortured definition of voluntary is being offered by others about the so-called FAIR tax.

As for my flat tax proposal, why shouldn't everyone pay an equal share in taxes? Note I said nothing about income. My really radical proposal is to scale the Federal government back to it's original powers, primarily national defense, and any other enumerated powers the states see fit to centralize. Then really honor "all men are created equal" and tag everyone with an equal share of the burden. This will quickly bring about the scaling back! Why not?

[NonValueAdded]

So the wealth of an individual (whether measured in income or in consuption) should make no difference?

Exactly. I didn't think "from each according to his ability" was part of our constitution. What is your constitutional basis for transfer payments?

The current population is 294,997,212. At $1000 a head, that comes to almost $295 billion. Go to $2000 and you are approaching $600 billion. Isn't that enough to meet the constitutional powers? Sure, crank in some sort of tax forgiveness for the poor (based on income and assets). But when it comes to the main mission of the Federal government, national defense, why shouldn't each of us pay an equal share?

[ancient_geezer]

My really radical proposal is to scale the Federal government back to it's original powers, primarily national defense, and any other enumerated powers the states see fit to centralize.

One slight problem:

 

TAXES

 

100years of history under the income tax makes it clear that we will not get there (smaller government) from here (the income tax).

 

The Honorable James DeMint (R-SC)
United States House of Representatives
APRIL 5, 2001

• "There has been a shift in the relationship between individuals and government, he argues, such that fewer and fewer are paying taxes at the same time that more and more are receiving increasingly generous benefits. If it becomes the case that most voters do not bear a financial burden for this largess, then there will be little to restrain--and significant political incentives to encourage--the continued growth of government.

Guess where we are at

 

Walter Williams, World Net Daily, 10-25-2000

According to the most recent U.S. Treasury Department figures, in 1997 the top 1 percent of income-earners (those with income of $250,000 and higher) paid 33 percent of all federal income taxes. The top 5 percent of income-earners ($108,000 and over) paid 52 percent, and the top 50 percent ($36,000 and over) paid 96 percent of income taxes. Guess what the bottom 50 percent of income earners paid?

If you're among those who pay little or no federal income taxes, what do you care about tax cuts? Moreover, if you think tax cuts pose a threat to government handout programs, you might be openly hostile and support Al Gore's silly "risky scheme" talk. So many Americans paying little or no federal taxes makes for a natural spending constituency. It's like me in the restaurant: What do I care about extravagance if you're footing the bill?

 

What is the step you need to get from here

70% of the voting public clamor for more from government looking for the top 40% of income earners/producers to foot the bill.

To there:

23%........... Effective total federal tax rate with respect to gross expenditure for consumption:

15% ..... rate if Social Security and Medicare were eliminated
14% .......... rate if Nat'l Endowment for the Arts were eliminated
12%........ rate if Dept. of Education were eliminated
10%.......... rate if welfare & foreign aid were eliminated
etc.

So lets look at what the maximum it would take to fund those functions clearly authorized under Article I Section 8 of the Constitution, in current dollars:

http://w3.access.gpo.gov/usbudget/fy2001/guide02.html#Spending

• $334 Billion --- Defense & Military related expenditure
• $ 31 Billion ---- Administration of Justice
• $ 16 Billion ---- General Government
• $199 Billion ---- Interest on the Debt
  =========================
  $580 Billion ---- Total

Institute an across the board, Flat rate, single stage National Retail Sales Tax, which taxes all imports and domestic products with the same rate.

Replacing all current federal tax law with a retail sales tax would be 23% on new goods and services paid and receipted at the retail register. No hidden tax, no exceptions, exemptions everyone participates.

Such a tax acts in a natural manner to encourage the elimination of excess government functions through visibility of burden among all constituencies of the electorate.

The total federal government budget would move from $2,000 billions towards something less than $580 billions calculated.

The across the board federal tax rate on new goods and services would decline towards less than 6.7%.

As tax rate on sales decreases the economic burden on retail items, the sales volumes and growth in the economy would be tremendous allowing even further reductions in tax rates below that less than 6.7% theoretic level.

That is what I perceive as the ultimate achievements possible under a National Retail Sales Tax structured in the manner of the revenue bill H.R.25. Simple common sense applied to the principal of TANSTAFFEL,( no free lunch, everyone participates in paying their way in proportion to the benefit the extract from their consumption.) encourages the natural change in attitudes required of the electorate as regards the burden of government largess in their lives.

Thomas Hobbes from Leviathan

• It is fairer to tax people on what they extract from the economy, as roughly measured by their consumption, than to tax them on what they produce for the economy, as roughly measured by their income

Hmmmmmm....... It's do able, with time and effort, once the blinders are removed from the electorate.

[Your Nightmare]

Cut spending, that is what creates massive deficits.

Does the FairTax cut spending? I think it increases it, doesn't it?

[Your Nightmare]

Sure. I'm pretty sure you were the one who posted that it really wouldn't do any good to eliminate the bias that our current tax system provides to foreign producers over and above our own producers because the fed would just change the money supply and negate any attempt to level the playing field in that manner. IOW, it is inevitable that our system would shift in such a way that foreign producers would always have an advantage over us. Presumably that would hold true for foreign markets, as well as our own.

I'm not sure what you are talking about. I've said that any benefit in foreign markets would be short lived because the exchange rate would adjust quickly to counteract any price drop. Equilibrium would be established again. I also provide several sources for this belief.

The idea that we can do whatever we want and the world won't react is simplistic.

[Your Nightmare]

If take-home pay (THP) + the rebate (R) is 23% higher than before the tax shift and prices (P) stay exactly the same before imlementation of the FairTax (FT), then buying power (BP) is EXACTLY THE SAME.

Right, that's what I was saying, buying power will be exactly the same. We can either take home the same with prices the same (inclusive of tax) or we can take home more and prices rise by the amout of tax. Those are your choices.

What you can't have is lower prices and higher take home (buying power increases). That's not possible.

[Your Nightmare]

I would pay more tax with the FairTax, but most in the middle class would.

B.S.!

Well, if you have a chart from FairTax.org, that settles it!

My own review of my taxes show it to be true and every distributional analysis I've read (non-AFT, of course) of a NRST states that, with a demogrant, the two losers in the switch are the middle class and retired people.

Or are you trying to make us believe that everyone will pay less.

[phil_will1]

"The current population is 294,997,212. At $1000 a head, that comes to almost $295 billion. Go to $2000 and you are approaching $600 billion. Isn't that enough to meet the constitutional powers? Sure, crank in some sort of tax forgiveness for the poor (based on income and assets). But when it comes to the main mission of the Federal government, national defense, why shouldn't each of us pay an equal share?"

You obviously aren't seriously interested in doing something about our horrendous tax system; all you want to do is engage in philosophical debate. You know that eliminating all federal programs except for national defense is a political non-starter and you know that requiring poor people to bear the same tax burden as the affluent is going nowhere.

Do you have any serious and substantive comments to make on the subject of tax reform?

[phil_will1]

"The idea that we can do whatever we want and the world won't react is simplistic."

The idea that foreign producers will inevitably enjoy an advantage over US producers in international trade and that we might as well accept that and adjust to a lower standard of living might strike some as weak and defeatist, also. We are moving into a more global economy than any we have ever known before. We either adapt to that new environment or we pay the consequences.

Even if I bought your point that monetary exchange rates could be manipulated to reinstate the preference that our tax system currently provides to our products in foreign markets (and I certainly DON'T agree with that), that leaves open the question of our own market. Being the astute analyst of tax policy that you are, I am sure that it hasn't escaped your notice that our current tax system puts our own producers at a disadvantage even in our own market - the largest consumer marketplace in the world. If all the FairTax did was to level the playing field so that that situation is negated here in the US, wouldn't that ALONE be enough to justify its passage?

[phil_will1]

"Or are you trying to make us believe that everyone will pay less."

Not at all. There are a number of categories that will pay higher taxes under the FairTax than they do under the current system.
1. Illegal immigrants
2. Those deriving a substantial part of their income from illicit activities such as drug trafficing, pornography, prostitution and illegal labor
3. foreign visitors/tourists
4. those taking advantage of the many loopholes in the current system to lower their tax burden well below what the "progessive" nature of the current system suggests is the objective.

[phil_will1]

"Does the FairTax cut spending? I think it increases it, doesn't it?"

Eliminating the IRS and its $10 billion budget is not increasing spending.

[phil_will1]

"Or are you trying to make us believe that everyone will pay less."

Having identified some groups which will pay more under the FairTax, a couple of additional observations are appropriate.
1. It isn't a zero sum game, since we are eliminating several hundred billion $$ in compliance costs.
2. It is very difficult to precisely identify winners and losers in the aggregate since we are moving from a coercive to a voluntary tax system. Any individual, regardless of his demographic or economic group, can choose to modify his tax burden by his spending decisions.

[Your Nightmare]

You forgot:

5. Middle class
6. Retired people

[read any non-AFT distributional analysis and you see I'm right]

[kpp_kpp]

I agree, "fair" tax screws anyone with savings, especially retired people.

oh, wait, i forgot the "prebate" - that solves everything </sarcasm>

[Your Nightmare]

Eliminating the IRS and its $10 billion budget is not increasing spending.

Giving a monthly check to every man, moman, and child in America is. And so is increasing Social Security payouts. And covering bad loans for tax payments. Etc., etc., etc...

BTW, you don't think the SSA budget is going to have to increase to administer the FCA? What about a budget for the Sales Tax Bureau (IRS = STB)?

Please...

[Your Nightmare]

It isn't a zero sum game, since we are eliminating several hundred billion $$ in compliance costs.

It is a zero sum game when it comes to revenue. If someone is paying less, someone else has to pay more to generate the same revenue.

[Your Nightmare]

Even if I bought your point that monetary exchange rates could be manipulated to reinstate the preference that our tax system currently provides to our products in foreign markets (and I certainly DON'T agree with that), that leaves open the question of our own market.

It's not my point, it's the point of many economists. Here's one example, there are many more.

You know, if you start reading stuff that isn't on FairTax.org, you might learn something (like the AFT is only interested in marketing, not facts).

[phil_will1]

"You know, if you start reading stuff that isn't on FairTax.org, you might learn something (like the AFT is only interested in marketing, not facts)."

Oh, I have read plenty of stuff from the guardians of the status quo that you idolize. The JCT, Brookings, all that crowd. AFT exists to promote and advance the FairTax proposal. These other organizations exist to perpetuate the current system no matter how much economic damage it does. Like you, they have a personal vested interest in maintaining a system that they benefit from - even if they are in the minority.

At least AFT's agenda is upfront.

[phil_will1]

"It isn't a zero sum game, since we are eliminating several hundred billion $$ in compliance costs."

"It is a zero sum game when it comes to revenue. If someone is paying less, someone else has to pay more to generate the same revenue."

You must have missed my post at 171.

It would seem from the above that you are conceding that there are substantial savings in compliance costs. If so, that is real progress! In the past, you have argued that compliance costs are a figment of FairTaxers' imaginations.

Congratulations, YN. There may be hope for you. Just remember, if you don't get help at www.fairtax.org, get help somewhere!